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State of payments: Reinventing Money

If I had just two words to sum up everything that’s going in the payments industry right now, I’d pick “disruption” and “transformation.” There are few industries right now that are changing as much as this one, while acting as the catalyst for so much change in other businesses.

The disruption part is driven by technology.

Mobile devices, broadband wireless, cloud computing, sensors, Bluetooth Low-Energy, GPS, and a lot of other technology innovations have opened the door to new experiences that promise to take the friction out of transactions, while giving individuals more control over their finances and more value for their money. As people start to experience the freedom and flexibility of mobile payments and shopping, the demand for even greater things will continue to grow.

The transformation part is long overdue.

The existing system of payments, with its awkward mix of cash, coins, plastic cards, and printed receipts has been with us for a long time—decades for credit cards, centuries for cash—and people are ready for change. You can sense the growing dissatisfaction with how things work when you listen to people talk about how much they love to shop and eat out, but how frustrating it is to wait in checkout lines or chase down a server at the end of a good meal. They’re tired of juggling multiple accounts and sorting through wallets full of cards. They’re worried about identity theft and credit card fraud.

The question my industry is racing to answer is, what will replace the current analog system of plastic cards and paper cash?

I believe we’re heading very quickly toward a new era in which payments will essentially disappear. This may sound like an odd assertion from someone who leads one of the largest payments companies. But I believe that we have an amazing opportunity right now to use the power of technology to get rid of the barriers that make paying inefficient and frustrating, and that too often limit opportunity or stand between people and the things that they value, and want.

This isn’t to say that money itself will disappear. Or even that the current system of financial institutions and credit card providers will somehow evaporate. What will happen is that we’ll eliminate the steps in transactions that add time and friction without adding value. Instead, the moment when people exchange value will be built seamlessly into the experiences of shopping, enjoying entertainment, or taking advantage of services.

We’re moving into this new era pretty quickly. The car service Uber is a great example of where we’re headed. Once you download the Uber app, requesting a ride is simple; you can follow the route of the car that’s coming to pick you up; and payment takes place without you having to dig for cash or hand a card to a stranger, using the payment service or card account that you’ve already designated as your preference. With Uber, what matters is the experience of the ride, not the mechanics of the transaction. And it’s because the payments piece disappears that the overall experience is so magical.

At PayPal, we’re delivering a broad range of innovative products and services that are already providing the foundation for the payment-free world we’re envisioning, including the backend technology that makes the Uber experience possible.

But this is just the start. Working with Samsung, for example, we recently announced innovations that open the door to a world where you can pay on your mobile device using just a fingerprint for authentication. This new feature eliminates the need to type in a username and password, a step that is both inconvenient and a potential security weakness. Fingerprint authentication marks the beginning of an essential change in how we make digital commerce safe and secure. So far, security has always come at the cost of convenience. Now that we can begin to move from passwords to biometric information like fingerprints, we’re reaching the point where we won’t have to make this kind of tradeoff any more.

PayPal Beacon, an in-store sensor that connects people to merchants automatically through mobile devices, is another great example of how the future of payments is becoming concrete and real today. With PayPal Beacon, shoppers can make their purchases in a safe and secure way without ever taking their device or their wallet out of their purse or pocket.

This is all great stuff, of course. But what’s important to understand about the disruption and transformation in payments that we’re helping to make possible right now is that it isn’t just about making shopping more convenient and more fun—as worthy a goal as that is.

What we’re really talking about here is a fundamental reinvention of money.

Why is this important? Because if you take the long view of human history, it’s pretty clear that as money become more fluid and more flexible, it serves as a powerful catalyst for human progress.

What we’re working to help create today at PayPal is the next chapter in the history of money. We envision a new era in which individuals have greater control of their finances and their personal information. In this era, people will have an unprecedented ability to define the role that money plays in their lives. It will be easier for creators and craftspeople to transform their ideas into value for themselves and their customers – growing the People Economy. Commerce will also become more global in reach while delivering greater benefits to local communities.

With so much change happening right now, it promises to be a volatile time and a pretty crazy ride over the next year or two. But the opportunity to play a role in something this fundamental is pretty unusual and exhilarating. Personally, I can’t imagine anything more exciting than being a part of an industry that is all about disruption and transformation for people.